HIGH GAS PRICES COULD DELIVER BLOW TO RECOVERY

A report out today from the Bureau of Economic Analysis shows that Americans’ incomes increased “sharply” in January, rising 1.0%.  While that is the biggest one-month increase since May 2009, the few extra dollars in workers’ paychecks is unlikely to ignite a surge in consumer spending or new hiring.  In fact, any extra money in Americans’ wallets will probably end up in their gas tanks, as instability in several oil-producing countries continues to push up the price of a gallon of gasoline.  According to John Challenger, chief executive officer of global outplacement firm Challenger, Gray & Christmas, the spike in fuel costs for both consumers and businesses could present the biggest obstacle yet to job growth and could prove to be a significant setback for the recovery.  “Companies will be reluctant to pass along their higher fuel costs to consumers.  So, the more companies are required to spend on fuel, the less they have to spend on expansion and hiring,” he noted.  Will higher fuel costs lead to a double-dip recession?  Will employers take any steps to help their workers cope with higher fuel costs, such as increased use of telecommuting or transportation allowances?  Will the spike on fuel costs accelerate efforts to develop alternative fuel sources in order to decrease the country’s dependence on foreign oil?

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